MTV Networks Readies Major Digital Music Overhaul

MTV Networks is now planning a major overhaul of its digital music initiative, one that may include a fresh joint venture with RealNetworks.

The company is expected to outline the details of the updated strategy during an official announcement today, though aspects of the plan were leaked early this morning by the Wall Street Journal.  According to the report, MTV Networks is melding its ill-fated Urge music store with Rhapsody, a rival subscription service from RealNetworks.

For MTV, the move represents a major move away from Microsoft.  Yet Microsoft largely abandoned Urge – and a number of other PlaysForSure-compatible stores – by launching an entirely new ecosystem based on the Zune portable media player.  That left MTV Networks in a somewhat gray, unsupported area, and rendered Urge a rather unfortunate victim of a growing incompatibility mess.  The move towards RealNetworks would end that situation, though it does not solve a remaining iPod incompatibility problem.  Meanwhile, Verizon Wireless is expected to offer mobile distribution for the effort.

For RealNetworks, the joint venture introduces a massive amount of promotional firepower, and potentially an influx of new money.  Just recently, the Viacom-owned MTV injected $500 million into its digital games initiatives, and similar levels of cash could be moved into music as well.

From a broader perspective, the partnership signals a new chapter for MTV, though Urge is only one component of a jagged story.  Urge was launched in May of last year, and predated a tumultuous executive shakeup involving the exit of freshly-minted Viacom chief executive Tom Freston.  A major reason for that push was a missed buyout opportunity involving MySpace, a company plucked for a bargain price of $580 million by News Corp.  MySpace remains an incredibly influential and profitable player in the lives of younger users, and is also becoming an increasingly important power-broker in music.

Elsewhere, iPod+iTunes remains an unquestioned leader in digital music management, ecommerce and portability, though MTV and RealNetworks are aiming to finally challenge that supremacy.